Sunday, March 12, 2017

Why Are Drug Prices So High?

Why are the costs of prescription drugs so high?  While I have prescribed thousands of them, I can’t offer an intelligent answer to this inquiry.  Of course, all the players in this game – the pharmaceutical companies, Pharmacy Benefit Managers, insurance companies, consumer activists and the government- offer their respective bromides, where does the truth lie? 

While I don’t fully understand it, and I don’t know how to fix it, we all know that the system is broken.  More than ever before in my career, I am seeing patients who cannot afford the medicines I prescribe for them.  In the last few weeks of this writing, 3 patients with colitis, a condition where the large bowel is inflamed, called me to complain about the cost of their new medicine.  The annual cost was in the $2,500 - $3,000 range, which is way out of range for normal folks.  While I was only focused on the colitis drug, many of these patients face prohibitive costs over multiple medicines.  All of these patients had medical insurance, thought it didn’t feel like it to them. 

Medicine or Retirement?

Should sick patients be given the added burden of price gouging?

I'm not an attack dog against PhRMA.  I've expressed sympathy on this blog and elsewhere that it costs pharmaceutical companies a fortune to design, test and market new medicine.  R & D is not cheap.  If we want this industry to take risks developing tomorrow's drugs, then they deserve a profit high enough to justify the investment.  Nevertheless, from the prescribers and the consumers points of view, the system is out of balance and needs to be recalibrated.  

I reviewed my colitis patients' formularies, which is the list of medicines that patients' insurance companies cover.  If a drug is labeled as a ‘Tier 1’ drug, then the cost to the patient is the lowest.  The higher the Tier #, the more the patient will pay.  This is how the insurance company ‘guides’ physicians to prescribe cheap drugs.  Of course, the insurance company will never say that the patient can’t receive an expensive drug.  That’s a decision, they claim with a straight face, that’s between a patient and the doctor.  Give me a break.  Ordinary folks, especially retired people on fixed incomes, are confined to lower Tier medicines.

I have no issue with the Tier system as long as there is at least one Tier 1 drug that can do the job.  If there are half a dozen heartburn medicines that are equally effective, I understand if an insurance company makes one of them Tier 1, their preferred choice.  This happens when the insurance company gets a special discount on this particular medicine.  

With regard to my 3 colitis patients, the only Tier 1 drug was one that came on the scene decades before I was born.  The standard colitis medicines that every gastroenterologist would have prescribed were all upper Tier. My patients had no choice but to accept an inferior drug. 

If any reader can explain why our drug prices are the highest in the world, can you also explain why insurance companies are not practicing medicine?


  1. Love this article. I simply cannot understand why the heck they are so high... While I get we need regulations when Canada is besting us on pricing isn't that a sign we've gone to far? Idk loved the read

  2. Great article! I believe the evil villain here is the pharmacy benefit manager. They really aren't anything more than a drug broker. PBM's have no vested interest in the health of their patients - what a great racket! So what if the patient needs surgery or hospitalization because they could only take the inferior drug, the PBM doesn't have to pay for that... health insurers get to pick up the tab. Patients often don't even know what a PBM is, let alone the difference between their insurer and PBM.

    I take a biologic for my RA and I used to have Express Scripts for a PBM. I was amazed at the policy in place that created havoc when it was time for a new prior auth or worse, a change of drug. I'm convinced that there is deliberate delaying tactics used by this PBM. Each year the fax number would change but they'd forget to update it.... oops. One time my rheumatologist's prior auth gal let me listen to the recording from ESI's p/a dept- they required the usual info, then said that if a repeat call was made the p/a would be delayed. Meanwhile they'd delay it anyway. Once when I was delayed for a renew on Enbrel I was told that my physician had prescribed an incorrect dosage of the medication -they said that the dosage was 50mg weekly but I'd been prescribed .98ml, so it had to be reprocessed. Of course the .98ml was the volume, not the dose, and there was nothing wrong with the way it had been written.

    It doesn't take long with a calculator to do the math. The $$ that are saved by delaying just a little is huge. If my disease activity increases and eventually I need a joint replacement so what.... the PBM doesn't pay for it.

    It seems PBM's are the biggest complainers of high drug prices. Coincidental? I think not.

  3. Why are prescription prices too high? There is not a one size fits all answer. Step1, government regulations drive costs up, you must also add to that the state costs of compliance. This includes the cost and minutia to bring a product to market, and then they have only a certain amount of time to recoup was invested and make a profit. Step2, there is absolutely no economy of scale built into the cost. Four people buying the same product at the same time could be charged four different prices. Insurance companies make contractual arrangements, see step1. Step3 The VA, Medicaid, Medicare, CHIP are prohibited from using bulk buying. Step4 Companies are beholding to stock holders to get a return on investment. There are many other causes, but these are a few to ponder. A few more to consider, all of the commercials of medications on TV, makes people think there should be a cure for everything. Marketing has added trillions of dollars of costs to drugs over the years. Don't underestimate the fraud and undue influences and kickbacks to physicians and hospitals and others
    for using certain types of drugs.

  4. Excellent comments! I agree with @Al Monte that there are obtacles that PhRMA faces with respect to R & D and bringing a product successfully to market. Of course, they are entitled to earn a substantial profit in return for the risk they undertake to bring us desperately needed treatments. Most drugs under study never reach the market. I am not certain, however, that this explains wild and inconsistent pricing. With respect to @RH Trucker, I am in complete agreement. I believe the entire Prior Auth universe is designed to deceive and delay making in difficult for physicans and patients to get decent and timely service If we ran our office using this strategy, we would have no patients to serve as they would all desert us, as they should. Many other industries also, I think, make customer service difficult and frustrating on purpose so that consumers simply give up. Do you really think that zillion dollar companies can't afford to hire more customer service reps, who are often located on the cheap abroad?

  5. PBM's have been under the radar for too long. The "Rebate system" has been a mechanism for profit for the PBM's. Express Scripts, CVS Caremark, and optimum RX control 80% of the PBM market. They take rebates from pharmaceutical companies for exclusionary positioning on their formulary. This forces physicians to prescribe sometimes two or three medications that make more profit for the PPM before they can prescribe the correct medication for the patient.
    I know of a rheumatoid arthritis drug that is trying to come to market this year with disruptive pricing (30% less) was told by all of the PPM's that they needed to increase the price of their drug if they had any hope of getting on the formulary. PPM's are now asking for huge rebates even up to 100% of the cost of the drug in order to get an exclusive position on their formulary. Often times they'll turn around and charge the patient 20% coinsurance on the retail price (fake price) of the medication.

    We need transparency to find out exactly how much PBM's are paying for these medications. We need to know what their rebate and fees are in order to more fairly distributed the savings. PBM's claim that if we see exactly what they are paying for drugs that somehow drug prices will be going up. Drug prices have been rising at an astronomical rate over the last few years but if you look at the profit made by the pharmaceutical company on those it is going down. I don't really care about their profit what I care about is passing the savings down to the patient. PBM's are now starting to feel the heat a bit and are trying to shift the blame back fully to the pharmaceutical companies. I say "a pox on both their houses". Large self-insured companies should negotiate directly with pharmaceutical companies and skip the middleman. They would most likely save lots of money if they could pass down the savings to their beneficiaries, their employees, at the same time their employees would get better care if the formularies allowed physicians to prescribe the correct medication not the one that gave the biggest kick back to the PBM.
    Madelaine Feldman MD
    Coalition of State Rheumatology Organizations - Vice President